Why Incentives Are Not Enough to Inspire (and Retain) Your Talent

What do inner-city public schools tell us about best practices for corporations to inspire and retain their talent? And what do they say about the role that business skills training can play? As it turns out: a whole lot.

Before we explain that connection, consider this: a recent study by Right Management found that a whopping 86% of employees—or about 4 out of 5—are planning for or actively seeking new positions. Compare that just 60% of employees seeking new positions in 2009.

True, an improving economy might be partially to blame. People no longer feel they have to “squat” to keep their job. Still, this leaves unanswered the question of why employees want to switch jobs in the first place. New studies are giving us some clues: its not a lack of incentives, titles, or “work-life balance.” The issue is that employees often feel a lack of challenge, an inability to advance, and frustration with the business skills training they receive. In short, they want to do better, but can’t see how in their current positions.

So what can be done to better inspire, and thus retain, your best employees? An inner-city school in New York yielded some surprising insights into motivation that answers just that question.

Pay for Performance

After years of weak test scores and underachievement, one public high school in New York started a “pay for performance” program. Students could earn cash and prizes for doing well on standardized tests and end-of-year exams. School administrators tracked test scores as well as their “investment” in students.

The results were disappointing: test scores did not change significantly, and payouts did not reflect a consistent level of achievement. But rather than scrap the program, researchers started to ask why. And when they interviewed students, they found something surprising: students were motivated plenty. They understood what they would get paid for, and were very enthusiastic about the prospect of getting paid.

They were also incredibly frustrated.

These inner city students wanted to do well and get paid; the issue was that they had little idea about how to translate their enthusiasm into tangible steps. For example, when asked how they could do better on the next test, they would say things like: “I need to re-read my answers to make sure I entered them correctly” or “I need to slow down and take my time, not race.” But they almost never said “I need to study more” or “I should see my teacher for extra help.”

Once the school started teaching students the methods they needed to succeed (and made them easier, like offering after-school help) test scores began to rise dramatically. Similar results were found in studies done in Chicago, Washington D.C., and other metropolitan areas. It turned out that what the students needed wasn’t so much extra motivation. They just needed some basic skills to succeed.

Business Skills Training is the Cure-All

What educators discovered about students is also turning out to be true for employees: the missing ingredient for high achievement is not motivation so much as know-how. If you want employees that are more engaged, and more likely to do the right things, your first priority should be to teach them tangible steps towards improvement. You need, in short, better business skills training.

For example: could your sales be higher? Most companies would say “Of course!” And the way those companies try to boost sales is with sales incentives: vacations, bonuses, corporate gift cards, etc. Instead, they should try sales training. Imagine what would happen if your sales force knew how to uncover unmet customer needs more quickly? Or how to overcome common kinds of objections? The same idea goes for corporate incentives, wellness incentives, safety incentives, and so on.

This is not to say that incentives are useless. Motivation is part of the equation, especially for boring or unpleasant tasks. But you should never underestimate the power of a little on-the-job training.